Can A BVI Trustee Use A Special Power Of Appointment To Amend A Trust?

Abstract This article analyses the decision of Bannister J, at first instance, and the Court of Appeal of the Eastern Caribbean Supreme Court, on appeal, in the matter of The New Huerto Trust, ex p. Royal Fiduciary Group Limited.1 The case raised the question whether British Virgin Islands law follows English law on the availability, in general, of special powers of appointment for the purpose of amending a discretionary trust by, amongst other things, excluding one or more discretionary objects, and of the availability, in particular, of the special power of appointment conferred by the New Huerto Trust for that purpose. At first instance in Blausten v IRC,2 (Reginald) Goff J had to consider (amongst other things) the ambit of a very common kind of power given to trustees to appoint that the whole or any part or parts of the capital of a trust be held:

upon such trusts . . . for the benefit of any one or more of the specified class . . . and subject to such powers and discretions exercisable by any person or persons . . . and generally in such manner as the trustees shall think fit.

The power was exercised in that case by the trustees so as to appoint that the fund be held upon exactly the same (discretionary) trusts as existed immediately prior to the exercise of the power save that (amongst other things not of relevance) the definition of the specified class was altered so as to delete a reference to the settlor's wife and widow. Goff J ruled the appointment was 'not effective at all'. He appears to have been led to that conclusion by focusing on the net effect (and clear intention) of the appointment— which was, for fiscal reasons, to delete members of the specified class—but this, he held, 'there was no power to do'.

It will be observed immediately that the asserted lack of power assumes rather than proves what was in issue, namely, whether a wide power of appointment to appoint capital on trusts (including discretionary trusts) among one or more of a specified class contains within it the power to delete members of the specified class: the fact that there is not separate, express power to remove objects from the specified class does not conclude that question. For this reason alone, Goff J's decision on this point might, with respect to him, be thought questionable.

It might also (had it stood) have been damned as having been decided per incuriam in that the earlier decision of the Court of Appeal in Muir v IRC3 was not cited to the court despite being in point and to contrary effect. In that case it was held that a re-settlement of a trust fund upon trusts identical with the existing trusts but excluding a particular power in the trustees was within the ambit of a power to appoint:

the whole or any part or parts of the capital of the trust fund to or for the benefit of all or such one or other of the beneficiaries if more than one in such shares and in such manner generally as the trustees shall . . . think proper

it being made clear that the trustees might in so appointing:

settle the property appointed in such manner . . . with such discretionary trusts or powers of appointment . . . as the trustees may think fit.

Even bearing in mind that decisions on points of construction do not generally create precedents, the relevant clauses and material facts in both cases were so similar as to have required citation of the earlier case before Goff J and for Goff J to have either followed or distinguished it.

When Blausten reached the Court of Appeal, Buckley LJ (with whom Orr and Salmon LJJ agreed) differed from Goff J on the question of the construction of the power preferring the approach of the Court of Appeal in Muir. He said:

. . . what was done by the deed of appointment was something which was clearly within the terms of the power of appointment. It was an appointment under which the capital was directed to be held upon trusts for the benefit of members of the specified class, and although the objective of the trustees in making the appointment may not have been the kind of objective which the settlor had in mind when he conferred the power of appointment upon the trustees, the appointment nevertheless in my judgment falls within the power.

Goff J had instinctively approached the question of construction in a purposive way whereas the Court of Appeal, both in Muir and Blausten, approached it more literally and, in each case, easily found what was done to be within the four corners of the power. Since the powers in question are to be found in countless discretionary trusts, the decisions in Muir and Blausten are of assistance as to the likely construction of similar powers and have over the past 50 years given many trustees and their advisers comfort, if not the complete indemnity afforded by a court direction, that the common form...